Papers
Uploaded: Mar 16, 2019
Corporate Liquidity Management under Moral Hazard
We present a model of liquidity management and financing decisions under moral hazard in which a firm accumulates cash to forestall liquidity default. When the cash balance is high, a tension arises between accumulating more cash to reduce the probability...
Uploaded: Mar 15, 2019
The Good, the Bad and the Complex: Product Design with Imperfect Information
This paper explores the incentives of product designers to complexify products, and the resulting implications for overall product quality. In our model, a consumer can accept or reject a product proposed by a designer, who can affect the quality and...
Uploaded: Mar 14, 2019
The Tragedy of Complexity
This paper presents an equilibrium theory of product complexity. Complex products generate higher potential value, but require more attention from the consumer. Because consumer attention is a limited common resource, an attention externality arises: Sellers distort the complexity of their...
Uploaded: Mar 13, 2019
Asymmetric Information and Security Design under Knightian Uncertainty
We study a signaling game in which an issuer with private information about the distribution of the project’s cash flows designs a security to sell to an uninformed investor to raise financing for the project. The investor faces Knightian uncertainty...
Uploaded: Mar 12, 2019
Liquidity Sentiments
We develop a rational theory of liquidity sentiments in which the market outcome in any given period depends on agents' expectations about market conditions in future periods. Our theory is based on the interaction between adverse selection and resale considerations...
Uploaded: Mar 11, 2019
Capital Misallocation and Risk Sharing
This paper shows that factor misallocation is closely tied to the risk-sharing avenues available to firm owners. In contrast to the commonly studied bond-only economy with collateral constraints (for example Moll (2014)), we find that the degree of misallocation is...
